Earnings Call Insights: Bentley Systems (BSY) Q2 2025
Management View
- Gregory S. Bentley, Executive Chair, highlighted that "our outlook range for 2025 would complete the process of at least doubling over these 5 years each of our key financial metrics of ARR, revenues, adjusted operating income less stock-based compensation and free cash flows while minimizing equity dilution." He emphasized Bentley's market share leadership in infrastructure engineering software, particularly for horizontal infrastructure networks, noting, "I believe that we are favorably differentiated by virtue of our established franchise as the outright market leader in comprehensive infrastructure engineering software."
- CEO Nicholas H. Cumins stated, "We delivered another strong quarter despite ongoing global uncertainties. This performance underscores the resilience of our business model and the strength of our end markets driven by secular infrastructure investment." He reported ARR growth of 11.5% year-over-year, with a net revenue retention rate of 109%, and continued strength in the E365 and SMB segments. Cumins also noted, "the willingness of accounts to commit to higher contractual floors in return for corresponding ceilings signals their confidence in the strength and sustainability of their own demand environment."
- CFO Werner Andre said, "Total revenues for the second quarter were $364 million, up 10% year-over-year on a reported basis and 9% on a constant currency basis." Andre added, "Subscription revenues now represent 92% of total revenues, up 2 percentage points from the same period last year, reflecting improvement in the overall quality of our revenues visibility, growth consistency and margin contribution."
Outlook
- Werner Andre stated that the company is "well positioned with respect to our financial outlook range for the year." He added, "we are raising our 2025 free cash flow outlook to a range of $430 million to $470 million from previously $415 million to $455 million" due to recent tax policy changes.
- Management reiterated confidence in meeting the full year outlook based on "low double-digit ARR growth, continued margin expansion of approximately 100 basis points and robust free cash flow generation." Cumins highlighted momentum in global infrastructure investment and tailwinds from legislative actions in the U.S. and Europe.
Financial Results
- Werner Andre reported, "adjusted operating income less SBC expense was $105 million for the quarter, up 10% year-over-year with a margin of 28.9%, up 10 basis points."
- Free cash flow for the quarter was $57 million and $273 million year-to-date. Andre clarified, "free cash flow for the first half would be on the order of 60% of our full year free cash flow outlook."
- The company ended Q2 with ARR of $1.379 billion at quarter-end spot rates, and subscription revenues grew 12% year-over-year for the quarter.
Q&A
- Matthew George Hedberg, RBC: Questioned about macro conditions and the strength in SMB. Nicholas H. Cumins responded, "It's a very consistent environment from the standpoint of all the investment that is going into infrastructure... What we're hearing from our accounts is that they are just very positive about their own outlook whether they are big or small accounts."
- Joseph D. Vruwink, Robert W. Baird: Asked about product reach for engineers spending below $1,000. Cumins explained the company offers "the full range," with MicroStation being the entry point and main growth driver in SMB, and strong upsell opportunities.
- Kristen Owen, Oppenheimer: Inquired about the data center opportunity. Cumins stated, "These are really more like mini-cities or campuses. Whenever you have high spatial density with engineering complexity, this is typically a great opportunity for us."
- Jason Vincent Celino, KeyBanc: Asked about free cash flow guidance and benefits from tax policy. Werner Andre confirmed, "There will be multiple years of benefits... The $15 million is for the first year and... this will roll over into the 2026 year."
- Warren Meyers, Griffin Securities: Asked about R&D hiring and product development. Cumins emphasized, "our R&D priorities are AI, Cesium and an integration of Cesium integrated across the portfolio... our big focus when it comes to hiring R&D resources is AI, which again is our #1 priority when it comes to investment this year."
- Taylor Anne McGinnis, UBS: Asked what could drive upside to the high end of ARR guidance. Gregory S. Bentley pointed to asset analytics opportunities and selective acquisitions as potential catalysts.
- Ivan Radojicic, Wolfe Research: Queried about net revenue retention. Bentley and Andre clarified the minor change was within the expected range and continued to reflect solid account accretion.
- Sitikantha Panigrahi, Mizuho: Asked about agentic AI and its impact on productivity. Cumins responded that engineering firms are "absolutely leaning in to adopt AI," and the company is working on expanding AI capabilities across engineering applications, with a focus on supporting the evolving needs of customers.
- Dylan Tyler Becker, William Blair: Asked about the evolution of pricing as AI increases productivity. Cumins described ongoing discussions with clients about adapting pricing models and maintaining mid-single digit price escalations.
Sentiment Analysis
- Analysts expressed a generally positive tone, focusing on growth levers, market expansion, and product strategy, while probing for clarity on seasonality, pricing, and AI monetization.
- Management maintained a confident, optimistic tone in both prepared remarks and responses, often stressing the consistency of demand and resilience of the business. Cumins said, "We're very much early stage. Gregory S. Bentley: "I believe that we are favorably differentiated... I wouldn't trade positions with any design software peer or competitor."
- Compared to the previous quarter, analyst sentiment shifted from cautiously optimistic to more constructive, with less focus on macro risk and more on product and pricing strategy. Management maintained a steady tone of confidence.
Quarter-over-Quarter Comparison
- The company raised its free cash flow outlook this quarter, while last quarter the guidance range remained unchanged.
- Both quarters reported strong ARR growth and consistent revenue mix improvements, but Q2 included more detailed commentary on market share, product integration (especially Cesium and AI), and legislative tailwinds.
- The Q&A this quarter featured more discussion of pricing strategies, AI integration, and asset analytics, while the previous quarter focused more on macro risks and geographic diversification.
- Management confidence and analyst positivity remained high quarter-over-quarter, with an increasing emphasis on leveraging new technology for future growth.
Risks and Concerns
- Management acknowledged that China now represents only about 2% of total ARR, continuing to face economic and geopolitical headwinds.
- Andre cautioned about seasonality, expecting Q3 to be the seasonal low for ARR growth due to timing of acquisitions and asset analytics deals.
- Asset analytics remains a source of volatility, described as "large and lumpy" by Bentley, with ongoing efforts to target more stable, recurring customer segments.
- Uncertainties around regulatory changes, tariffs, and policy shifts remain, but management emphasized strong resilience and consistent demand signals across accounts.
Final Takeaway
Bentley Systems delivered another quarter of robust growth, highlighted by significant progress in recurring revenues, strong ARR expansion, and a raised free cash flow outlook for 2025. Management credited the company's resilience to a diversified market presence, expanding product capabilities in AI and geospatial technologies, and favorable legislative trends supporting infrastructure investment. The commitment to innovation and prudent capital allocation positions Bentley well to capture further growth opportunities, while ongoing integration of acquisitions and evolving pricing strategies are set to drive future value creation.
Read the full Earnings Call Transcript
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